The consequences of being deemed a “joint employer” are significant. It can mean that one company is liable to or for the employees of another company in several contexts, including compliance with wage and hour, safety and health, and labor laws. Companies should stay attuned to the risks of joint employment, and the federal government has given them lots to consider so far in 2026.
On February 26, 2026, the National Labor Relations Board (NLRB) issued a final rule reinstating its relatively business-friendly 2020 standard for determining joint employer status, revoking its more employee-friendly November 2023 final rule. The NLRB rule went into effect on February 27, 2026.
Following suit, the Department of Labor (DOL) issued a notice of proposed rulemaking on joint employer status under the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and Migrant and Seasonal Agricultural Worker Protection Act (MSPA) on April 22, 2026. Like the NLRB rule, the proposed DOL rule harkens back to President Trump’s initial attempt to issue joint employer guidance in 2020.
2020 Joint Employer Standard. In 2020, the NLRB formalized nearly 30 years of case law through a final rule providing that an employer may be considered a “joint employer” only if two entities “share or codetermine the employees’ essential terms and conditions of employment.” Under this standard, an entity must possess and exercise substantial direct and immediate control over at least one essential term or condition of employment. These terms include wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.
The rule further clarified how an employer may demonstrate “direct and immediate control” over these eight terms and conditions of employment:
- Wages. An employer determines the wage rate, salary, or other form of compensation paid to another employer’s employees or job classifications.
- Benefits. An employer determines the fringe benefits offered to another employer’s employees, including selecting benefit plans such as health insurance or retirement plans and establishing the level of benefits provided.
- Hours of work. An employer sets employees’ work schedules or hours, including overtime. Simply establishing business operating hours or determining when services are needed does not, by itself, constitute direct and immediate control.
- Hiring. An employer decides which specific employees will be hired or not hired.
- Discharge. An employer directly decides to terminate the employment of another employer’s employee.
- Discipline. An employer makes the decision to suspend or otherwise discipline another employer’s employee.
- Supervision. An employer directs another employer’s employees how to perform their work or issues employee performance appraisals.
- Direction. An employer assigns specific employees to particular schedules, positions, or tasks.
2023 Joint Employer Standard. In 2023, the NLRB replaced the 2020 rule with a significantly broader standard for determining joint employer status. Under the 2023 rule, two entities could be considered joint employers if they each maintained an employment relationship with the workers and shared or codetermined at least one essential term or condition of employment. Unlike the 2020 rule, the 2023 rule did not require proof that the alleged joint employer actually exercised substantial direct and immediate control. Instead, joint employer status could be based on the mere authority to control essential terms and conditions of employment, even if that authority was never exercised.
The 2023 rule also recognized indirect control as sufficient to establish a joint employer relationship. As a result, an entity could potentially be considered a joint employer if it influenced working conditions through an intermediary, such as a contractor, franchisee, or staffing agency. This broader approach significantly expanded the circumstances under which businesses could be deemed joint employers under federal labor law.
Challenge to the 2023 Standard. Shortly thereafter, several business groups filed a challenge to the 2023 rule in the U.S. District Court for the Eastern District of Texas. The plaintiffs argued that the rule improperly expanded the definition of a joint employer beyond traditional common law agency principles and would create significant uncertainty for businesses that rely on franchising, subcontracting, or staffing arrangements.
On March 8, 2024, the district court struck down the 2023 rule. The court concluded that the rule was contrary to law because it allowed a finding of joint employer status based solely on indirect or reserved authority to control working conditions. According to the court, the traditional common law test for joint employment relationships generally requires evidence of actual control over employees’ terms and conditions of employment.
The court also reasoned that the rule’s broad approach could effectively classify many companies that contract for labor as joint employers because most business contracts contain provisions that indirectly affect scheduling, workplace rules, or performance expectations.
Return to the 2020 Standard. In February 2026, the NLRB formally reinstated the 2020 rule through a new final rule, confirming that the narrower standard requiring substantial direct and immediate control would continue to apply. Under this framework, businesses are unlikely to be considered joint employers unless they directly control key employment decisions affecting another employer’s workers.
The reinstatement of the 2020 rule highlights the ongoing policy debate surrounding joint employer liability under the National Labor Relations Act. Supporters of the narrower standard argue that it provides greater clarity and predictability for businesses, allowing companies to structure relationships with contractors, franchisees, and staffing agencies without facing unexpected collective bargaining obligations. Critics, however, contend that the rule fails to reflect modern employment structures, in which companies may exert significant influence over workers through contractual relationships without directly supervising them.
DOL
2020 Joint Employer Rule
Like the NLRB, the DOL’s joint employer rulemaking has been on a rollercoaster across the last three presidential terms. Beginning with President Trump’s first term, in 2020, the DOL finalized a business-friendly joint employer rule that required entities to exercise “actual” control to be considered an employer. To be considered an employer under this rule’s narrow definition, the entity had to actually control one or more of the following four factors:
hiring or firing, supervising work schedules or conditions of employment, determining rate and method of payment, and maintaining employment records.
Very quickly, however, portions of that rule were struck down in federal court. Upon a challenge to the rule by 17 states and the District of Columbia, the U.S. District Court for the Southern District of New York held that the rule’s requirement that an entity actually exercise control over a worker conflicted with the FLSA, the governing statute, and therefore violated the Administrative Procedure Act.
2021 Recission
After President Biden came into office, the DOL formally rescinded the 2020 rule. Unlike the NLRB, however, the DOL did not issue a replacement. Thus, employers were left to return to the case law for guidance.
New 2026 Proposed Rule
On April 22, 2026, the DOL’s Wage and Hour Division announced a new proposed rule to address joint employer status. The rule harkens back to the 2020 version, but with some key differences.
Like the 2020 rule, the DOL’s proposed joint employer rule distinguishes between vertical and horizontal joint employment. Vertical employment means an employee is “jointly employed by two or more employers that simultaneously benefit from the employee’s work,” such as traditional staffing agency/client or contractor/subcontractor relationships. Horizontal joint employment, on the other hand, occurs where an employee works separate hours for two or more employers in the same workweek, but the employers are “sufficiently associated with each other.”
Under the proposed rule, the determination of vertical joint employment would be based on a four-factor test, like the 2020 rule. The four factors remain the same: whether the potential joint employer (1) hires or fires; (2) supervises and controls the schedule or conditions of employment to a substantial degree; (3) determines the rate and method of payment; and (4) maintains the employment records.
However, unlike in 2020, the proposed rule no longer looks only to the actual exercise of control. Rather, the rule provides that an employer’s ability, power, or right to act—regardless of actual exercise of such control—is relevant. At the same time, the new rule also notes that this so-called “reserved control” is not as relevant as actual control. By incorporating “reserved control” as relevant, the new rule avoids the pitfalls that caused the court to vacate the 2020 rule’s standard for vertical joint employer liability.
To determine horizontal joint employment, the rule proposes a method that focuses on the relationship between the employers based on all the facts and circumstances. This largely retains the long-standing analysis from the pre-2020 regulations for horizontal joint employment.
There are two more noteworthy differences from the 2020 rule. First, unlike the 2020 rule, the proposed rule would apply the same joint employer framework not only to the FLSA, but also the FMLA and MSPA. Second, the proposed rule includes a new subsection that explicitly identifies five common business practices that, standing alone, do not make joint employer status more or less likely. The rule provides multiple illustrative examples, including one dealing with a franchisor-franchisee relationship.
Conclusion
Ultimately, the evolution of the NLRB’s and the DOL’s joint employer standards demonstrates how federal labor policy can shift with changing regulatory priorities and judicial review. For employers, the key takeaway is that joint employer liability remains a dynamic and closely watched area of employment law. Businesses that rely on subcontractors, franchise models, or staffing agencies should remain aware of these developments and carefully evaluate their relationships with other entities to understand coverage by the current standard while remaining prepared for potential future changes.
If you have any questions regarding joint employer issues, please feel free to reach out to the authors or your regular Saul Ewing attorney.
